Oklahoma Lawmakers Inadvertently Enact Loser-Pays

According to news reports last week, the legislature in Oklahoma passed, and Gov. Mary Fallin then signed, a bill whose wording directs judges to award reasonable attorneys’ fees and costs in cases of civil litigation. The provision was part of a bill on certain child abuse lawsuits, and its Senate sponsor said it was believed that the fee provision applied only to those cases until on a closer reading “it seems evident that it makes all civil cases … loser pays,” said Sen. David Holt. “But nobody caught that.”

As someone who has been writing in favor of the loser-pays principle since my first book, The Litigation Explosion, you might expect my reaction to this news (once I stopped laughing) to be positive. After all, there’s nothing wrong with a legislature enacting good policies through inadvertence. (For some legislatures, that seems to be the only way they do enact good policies.)

Sober second thoughts, however, will be less cheerful. Most advanced legal systems around the world follow versions of a loser-pays rule, but generally with the advantage of long experience that has allowed kinks to be worked out through Hayekian evolution, code tinkering, or both. Even the state of Alaska, the only one of the 50 to follow the principle, traces its experience back to 19th century territorial days. A well-functioning system must reflect a lot of embodied knowledge about how to handle the many intermediate cases (where both sides win on some issues, for example, or when a case wins but recovers no more than had previously been on the table as a settlement offer). Completely different results and incentives can be expected if fee shifts are set at artificially high levels (say, on a rationale of encouraging more assertion of the claim in question) than if their amount is low-balled.

Where there is no evolved local tradition, trying to design a system from scratch means either tying judges’ hands, inviting one set of problems, or accepting that they will use their discretion in perhaps surprising ways. Would you have guessed, for example, that language explicitly and neutrally providing for two-way fee shifts would at length be interpreted to entitle prevailing plaintiffs, but not prevailing defendants, to collect fees in ordinary cases? That’s what has happened in many employment discrimination cases in federal court.

Assuming Oklahoma goes ahead and does not look back, it will be placing a lot of confidence in its judiciary to learn fast and resolve a lot of issues on the fly.